Monday, August 19, 2019

Wall Street or Jurassic Park?

The inverted yield curve has been in the news ("What’s the Deal With That Inverted Yield Curve? A Sports Analogy Might Help,NYT, 8/15/19). The Times compared the American economy to the New England Patriots who have a coach, Bill Bellichick, 67 and a quarterback Tom Brady, 42. You might bet on them next year, but you’re not going buy futures on the team. However, the idea of an inverted curve is a rather pregnant image. It’s kind of a financial version of Peyronie’s Disease, the abnormal curvature of the penis. One likes to think in terms of progress and there are many investors who subscribe to the view that over the long haul, the march of securities will always be upwards. However, there was another piece in the same day's Times, an obituary for Kary B. Mullis ("Kary B. Mullis, 74, Dies; Found a Way to Analyze DNA and Won Nobel,NYT, 8/15/19) which may also be applicable. Mullis invented PCR or polymerase chain reaction which is a way of copying DNA to analyze it. The obit goes on to state: “Indeed, the science of PCR, because it allows for the unlimited replication of small bits of DNA, was one of the inspirations of ‘Jurassic Park,’ the Michael Crichton novel about a theme park of cloned dinosaurs that Steven Spielberg tuned in a  movie franchise.” What about examining the DNA of the players on the world stage from Donald Trump, to Xi Jinping, Vladimir Putin and even Kim Jong-un? It’s nice to think that the financial system is not suffering from a form of Peyronie's and that the inverted curve will flatten out and rise normally in response to stimulation. However, if something has occurred which is turning the leaders of the world into Dinosaurs, then you might want to take a massive short position in anticipation of the bottom falling out of not only the market but human life.

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